FAQ About Location Value Covenants
What is the primary purpose of LVC’s?
The collection of economic rent for public purposes in exchange for the abolition of taxation. Initially by exchanging for mortgages.
Where did the idea come from?
Traditional alternatives to taxation - namely Land Value Taxation - are the number one fiscal policy failure over the ages. LVC's emerged from a deep analysis of how LVT policy has performed historically and how to route around the roadblocks to both its introduction and permanence.
What was the biggest roadblock you found to LVT?
The enormous political difficulty in confiscating land assets from the most powerful members of society, banking and large estates. And the most powerful group of all - homeowners - who make up the largest of this class of resistance. The general public believe ideologically that ‘an Englishman’s home is his castle’. Owners of real estate truly believe these assets to be fairly owned and earned 'wealth' or private property, by right.
LVT supporters claim landowners acquired these assets illegally or against 'natural law' and see they should be fully recovered without question. How do you respond to this?
All owners of real estate as a collective are also the strongest class of all classes. Attempt to confiscate their property and they will use all that strength to oppose it. History testifies very well to their success.
If a confiscation policy such as LVT is bound to fail, how else can the economic rents be collected?
Confiscation is a litany of failure for LVT. The alternative to taking the rents by force is through voluntary elective agreement or consent of the location owner at the Land Registry.
What exactly are you proposing with LVC's then?
LVC's are a simple contract similar to a mortgage. An LVC is an agreement made between the government and the taxpayer to collect the rental value of a home in exchange for mortgage debt, and eventually tax liability. They are designed to give homeowners an alternative to a mortgage, with cheaper monthly payments, do not create problems for the nations financial infrastructure and reduce the inflationary effects of money issuance. A neat side effect is the revenue from LVC's can be used for public purposes rather than as an unearned income for a bank. Compared to similar policies such as Land Value Taxation they operate on the homeowners consent, not lawful confiscation. Its a free choice for every single homeowner to enter into an LVC, which will largely depend on if doing so will be cheaper for them. If not they can proceed with the traditional way of financing a hone with a mortgage.
Who would want to do it at inception?
Whoever is better off by doing so. First time buyers, negative equity holders, those on fixed income. To reduce those in most need and who would cost the state the most to mitigate if left unattended. Anyone else who would benefit by taking it up immediately. This is no bail out or benefits scrounging. All sides can be winners
How does this deal with the financial economy?
Who would you like to pay your rent to: the bank in mortgage interest or government for public purposes? Sure neither have a great record as good for the people. But at least government provide something in exchange for your hard earned. Banks do not lend their own money, nor do they give anything in a fair exchange for your interest payments. This isn’t an attack on banks, they would still have a useful economic purpose. It is merely pointing it all out. It’s up to you to decide now you know more about it.
What is your roadmap for abolishing all the big taxes on the production and exchange in the real economy?
Low hanging fruit: exchange for mortgages; costliest taxes next (VAT and the tariff); most economically beneficial next; the remainder finally if any remain
What about taxes lost from high earners or those who do not enter into an LVC. What about their tax revenue forgone?
None is lost. High earners are now paying a rent for benefits received, a win for the community. Those who decide against an LVC would still pay income tax at greater cost to their personal economy. That's their free choice, so be it.
What about the big land owning estates?
See the 11 questions above. Do not speed read, you will miss the secret.
What about bank assets, balance sheets, cash flow and financing it all?
Some LVC's are straight tax for equity swaps, no finance is involved. Others require financing. Banks create money as debt today. Instead with LVC's government creates it, we expect through Treasury Gilts.
How could we avoid the highly taxed and also tenants joining the scheme leaving the government with a depleted revenue from both rents and income tax?
You mean those who are both high earners(cash rich) and tenants (asset poor) depleting the tax base. Well they’re paying all of their dues in the benefits they receive, in rent, from the location they live on already. And high taxes. How would the tax base suffer from that? Also a tenant always has a lord who would have the option of paying income tax on the rent or adopting an LVC.
This sounds like a scheme which will be very slow to adopt. The longer it takes, the more likely it is to be undermined surely?
Individual LVC's are not the same as a national wholesale policy. Each new contract would mean immediate adoption for that plot. If it does indeed benefit the owner more than the alternative, the policy would spread to the extent it is successful and not undermined by propaganda wanting to blind people to it. If none were ever adopted what would be the loss economically and politically? Things would continue as before - sad but true. For LVT if the single tax was undermined(LVT is a litany of failure), years or work and taxation are wasted preparing it and governments might fall because the failure would be so visible.
Is the increasing price of locations the only economic rent?
No, but it’s by far the largest. Some 70% of the value of every nation is the location value of land - the demand for the best locations have the highest value. Others are the profit collected by banking, mostly for mortgages. But these profits are really a derivative of economic rent, not interest per se. Followed by the profits of monopoly corporations granted for free by the state as handouts and bailouts - benefit scrounging and corporate welfare. And then more remotely, the profits from the rights the state gives to intellectual property are partially an economic rent. Any unearned income qualifies - incomes where no further investment of labour or capital is required to maintain the asset value. Even crypto is made up from economic rents, where else can it be made from, there is no wealth involved in crypto!
Where can I find more information in detail?
http://www.systemicfiscalreform.org/Home/land-value-covenants
